Transatlantic and intra-European wood pellet freight rates have risen to record highs in recent weeks, lifting the 90-day spot price for industrial wood pellets delivered on a cif northwest European (NWE) basis to an 11-month high.
The Argus cif NWE wood pellet spot index has gained $20.88/t since January, settling at $151.53/t (€127.25/t) on 17 March, its highest since 1 April 2020. The growth in freight prices has been the dominant driver of the increase in recent weeks.
Freight costs have accounted for a much larger share of the cif NWE price so far this March. The Argus assessed Riga to Amsterdam-Rottendam-Antwerp (ARA) 3,550t coaster freight rate hit a record high of €28.50/t on 10 March, equal to a 22.48pc share of the cif NWE spot index — the 10th highest weekly percentage share recorded since the assessment began in July 2012. But the Argus spot wood pellet cif NWE index could decrease if freight rates ease in the coming weeks, a European trader said.
The high coaster and handysize freight rates in Europe have hampered spot liquidity in recent weeks and have been a barrier in trade discussions further along the curve, a European trader said. It is increasingly difficult to source low-priced wood pellet deliveries when freight prices are as high as they are, they added.
European freight costs have climbed as vessel availability has tightened amid sea ice restrictions, an increase in bunker fuel prices, Covid-19 restrictions, loading delays, and a pick up in global commodity demand.
Ice has been present at the biomass-exporting Russian ports of St Petersburg and Vyborg since 16 December, with ice restrictions in operation. Ice appeared at fellow Russian port Ust-Luga on 13 January, and new ice was recorded at the port of Riga on 10 March, data from the Finnish meteorological institute show.
Comparatively, ice was present at St Petersburg for just nine weeks in winter 2019-20 and for 12 weeks at Vyborg, but restrictions were lower than this year. Stockholm, Riga and Ust-Luga were all ice-free throughout winter 2019-20.
The cost of freight for a 25,000t handysize vessel from Savannah and Mobile to ARA on the transatlantic trade route neared record highs.
The 25,000t Mobile-ARA freight rate averaged $31.95/t in the first three weeks of March, up by 43.3pc on the year and 35.8pc higher than the historical average. While the 25,000t Savannah-ARA freight rate averaged $28.57/t in the first three weeks of March — 34.2pc above the historical average and up by 43pc year on year.
Higher fuel costs have been one of the primary drivers of freight prices. The Argus assessed fuel oil bunker 0.5pc 380cst Rotterdam spot price has risen significantly since bottoming out on 22 April 2020. The assessment averaged $483.94/t in the first three weeks of March, up by 6pc from February and 47.6pc from a year earlier.
Bunker fuel has accounted for 22.1pc of the Mobile-ARA 25,000t vessel rate in March — assuming the vessel burns 26t of fuel, travelling at 14 knots — not including a ballast leg. Comparatively, bunker fuel accounted for 21.4pc of the freight assessment a year earlier.
On the Savannah-ARA route, bunker fuel made up 20.3pc of the 25,000t freight rate in the first three weeks of March, compared with 19.6pc a year earlier.
The handysize and supramax price rise in the US Gulf is being driven by a shortage of supply, Japanese shipowner NYK Bulk said. And on the panama market, freight rates are being driven by grain exports out of South America.
Freight demand from other commodities such as grain has increased in recent weeks amid a rise in Asian demand. China remains one of the primary destinations for dry bulk goods, particularly grain. Coupled with this, an increase in stockpiling in anticipation of another potential Covid-19 wave, has caused a shortage in container availability, a European trader said. Vessels are tied up serving increased demand in some locations, which adds to delays and lifts costs further on all routes, a trader added.
